DAX
At the time of writing, the DAX index was down by 0.79% as Appel (AAPL) warned that their profits might not be as good as they had previously projected due to low production at their factories in China, and low Chinese consumption. The FT reports that there are up to four weeks of delays for Air pods, while the availability of the iPhone remains unchanged.
Also, damping the mood for Dax index traders is today’s German ZEW index for February. It declined to 8.7 from 26.6 and lower than the 21.5 projected by the market. The report is essential as it is the first report on how the German economy has coped with the breakout of the new Coronavirus in China.
Last week the bank, Credit Suisse, said they anticipate the ECB to reduce interest rates as they think the slowdown will hit the European manufacturing sector in China. Apple’s warning is a sign of that happening, and we also know for a while that carmakers have warned about problems.
The DAX index and US stock indices have, however, held well up so far. It is difficult to say how stock markets will react but it is fair to assume that volatility will be slightly higher than usual in the next few days. Moody’s think that the Chinese GDP will rise by 5.2% instead of the 5.8% they previously projected.
Read our Best Trading Ideas for 2020.
As for the DAX index, the trend is bullish above the February 9 low of 13427, and the breakout above the January 21 high opened the door for further gains, and the index to potentially reach the 14368 level, if we treat the range between the 2020-low and January 21 high as a rectangle pattern.
The rectangle pattern will remain in play as long as the DAX index trades above the February 9 low of 13427, however, on a break to the February 9 low the index might be able to reach the 13229 level, which is the 61.8% Fibonacci correction level of the gain from the 2020 low to the current 2020 high.